Disney’s Streaming Service Already Hemorrhaging Money …
Disney might take a $150 million hit to its bottom line as it works to beef up its array of streaming services, including the yet-to-launch Disney+. The company seeks to supplant Netflix as number one in digital content .
Disney CEO Bob Iger and CFO Christine McCarthy asked questions about the massive streaming-related outflows during the company’s first quarter 2019 earnings conference call. The subject about Disney foregoing licensing income came up and the executives gave details.
Speaking about Disney+, Iger said:
“We have a number of great creative engines across our company, all of which are dedicating their talent, focus, and resources to develop and produce strong content for the Disney+ platform.”
The willingness to forgo income to make Disney+ more viable might limit investors. The acknowledgment that Disney was willing to bypass the licensing money showed how bad the company wants this space.
Disney is a cinematic powerhouse and one of its highly-anticipated productions is “Captain Marvel,” which is to be released this year. It will be the first major movie excluded from Disney’s licensing agreements.
“[T]o put some context on that, “Captain Marvel,” which is coming out in this second quarter, is the first film that we will withhold from our output deals. So that’s where you can see the foregone licensing revenue begin.”
“When you look at the foregone licensing, it’s going to cross over two segments, our media networks, and the studio. When you look at fiscal ’19, that licensing revenue in combination net of APR, we estimate would be a decrease of about $150 million to [operating income] year-over-year. That will be more heavily weighted to the second half.”